Market indices are popular tools used by investors to describe and evaluate the performance of different areas of the financial marketplace. For example, market indices may be used for evaluating the performance of an entire stock market exchange, the performance of stocks of companies in a particular market segment, the performance of major high technology companies, the performance of growing biotechnology companies, etc. Additionally, market indices may be used to evaluate purpose-defined market segments, such as, for example, a subset of debt obligations. Market indices may also be created and used to pursue a wide variety of other goals.
In general, market indices are mathematical constructs based on a weighted aggregated value of one or more underlying assets. Because market indices are mathematical constructs, investors may not directly invest into market indices. Investors may, however, invest in financial instruments that attempt to mirror the performance of a market index. This may be accomplished, for example, by creating a fund that includes many of the same assets constituting a particular market index, and issuing financial instruments (such as securities) that represent the fund. Alternatively, financial institutions may issue financial instruments that are contracts that settle according to the value of a market index on a specified date. However, purchasing such financial instruments may not adequately hedge risks to which investors are exposed if the underlying market index is continually modified rather than new compilations of such market index being serialized, i.e., investors cannot currently continue to trade prior versions of a market index, but are instead limited to only trading the current compilation of such index.
Consequently, it is highly desirable to create a new type of financial instrument that is linked to or ‘tracks’ an index configured to retain each version of the index as it undergoes periodic and/or previously unannounced changes. Such a financial instrument would allow an investor to invest in any version of the index, including a future version that does not yet exist.